Dollar Tree reached an agreement to sell its Family Dollar business to Brigade Capital Management and Macellum Capital Management for just over $1B.
The sale price marks a stark drop-off in value for the asset, which Dollar Tree acquired in 2015 for about $9.2B.
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The deal is expected to close in the second quarter, subject to standard closing conditions and regulatory approvals, according to a Dollar Tree press release.
Dollar Tree framed the move as a sale that “best unlocks value for Dollar Tree shareholders and positions Family Dollar for future success.”
“This is a major milestone in our multi-year transformation journey to help us fully achieve our potential,” Dollar Tree CEO Mike Creedon said in the release. “We will continue to grow and optimize our Dollar Tree business to maximize value for Dollar Tree associates, customers, and shareholders with an enhanced focus on compelling initiatives.”
Dollar Tree's stock jumped Wednesday morning, a signal of investor enthusiasm for the move. An analyst for GlobalData Retail cast the sale as closing the book “on a sad and troubled chapter” for the discount retailer.
“Dollar Tree bit off far more than it could chew,” the firm's Neil Saunders said in a note to clients reported by CNN.
The purchase of Family Dollar was intended to help the brands expand their customer bases, but Dollar Tree had difficulty effectively managing both.
Dollar Tree had already begun slashing Family Dollar's footprint. Early last year, Dollar Tree said it would close roughly 1,000 Family Dollar locations as it fought inflation and store theft.
Brigade Capital Management is a global asset management firm founded in 2006 that has more than $27B in assets under management. The other new buyer, Macellum Capital Management, is an investment firm founded in 2009 that invests in undervalued companies.
“This transaction presented a unique opportunity to play a key role in reinvigorating an iconic business,” Macellum partner and CEO Jonathan Duskin said. “We look forward to executing the strategic plan we have developed together.”
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